March 2016

An Overpriced Market May Lead to Litigation

It appears the Los Angeles commercial real estate market has reached a plateau of price increases in the industrial and commercial sectors.  Property investors seem to be reluctant to pay higher prices for buildings.  The vacancy level in the Southern California market is approaching 2% in industrial space.  In addition, office space vacancies are in the low double digits.

I have written a blog where I said it is a great time to be a seller in the past; however, it appears now sales are slowing.  A commercial property seller in this market should have a broad spectrum of buyers looking for buildings from operators to investors.  There have been several Los Angeles properties where prices have been reduced, according to recent publications in the American Industrial/Commercial Real Estate Association (AIR) Multiple Listings service. 

A commercial real estate litigation attorney may have an angry client who contracted to purchase at the top of the market but was misled by the seller or broker and may want to litigate. Paying for high priced properties without full disclosure of material facts either by the seller, landlord or broker may produce serious consequences for the buyer.

The golden rule of disclosure is providing all information about the property where the seller or landlord thinks some fact may be important. The evidence behind disclosure is to make sure the seller or landlord discloses it in writing. Unless it is in writing, a seller may be accused for non-disclosing a fact.  No matter how insignificant the seller thinks the fact is, disclose it!  Even if the issue may be so obvious to the buyer, disclose it!   Agents should also disclose any material fact in their brochure on the property or they may be a victim of litigation.

The shortage of space in commercial real estate development caused by the economic downturn in Los Angeles from 2007 to 2009 has been replenished now. In the 4th quarter of 2015 alone about 5 million square feet of commercial space was under construction or redevelopment, according to Colliers Greater Los Angeles Basin Market Report.  In conclusion, a seller must be careful and make sure all aspects of a transaction are well documented and disclosed at all times in any market.

“Lee Segal is a one-stop shop when it comes to commercial real estate expertise. He’s a likeable person with a great sense of humor. His broad base of knowledge in commercial real estate and ability to build rapport with people make him a prominent force within his field.”    
Carol Newman, Alleguez & Newman, LLP